During August this year I travelled with BA to Faro at a cost of £598 (four tickets) booked in October last year. Today I looked to book similar flights (admittedly travelling Sat-Sat rather than Wed-Wed) for August 2004 and the cost is £955!
Having done some research, I have instead booked BA Heathrow to Lisbon flights (Sat -Sat) for August 2004 at a cost of £473 (four tickets).
Car hire costs seem to be the same in Lisbon as Faro and the extra hour or so in the car (and tolls) are negligible compared to the saving.
Also, just for info, you can book BA flights online through opodo (part owned by BA) earlier than you can book onlne direct with BA.
Sorry if everyone already knew all this but I didn't so I hope it at least might help someone else.

Barko, thanks for the info - I am really looking forward to the price levels when summer 2004 finally arrives.

Lisbon: Travel by car will set you back a little over 2 hours and € 75-80,-- (tolls and fuel) so it is well worth checking out Lisbon as an arrival option.

Same applies to Seville, same time - less tolls (no tolls )

However, an average 5-6 hour travel time (leaving the house to car pick-up) can make those extra 2 hours a bit uncomfortable. A few days in Lisbon or Seville for shopping and sight-seeing may be advisable.

However, car rental rates in Spain are considerably higher than in Portugal.

Not in my experience, rates at say Malaga are cheaper than at Faro although it is negliable, thank god it isn't Greece or Turkey where they are vast.

Maddi